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Ask HN: How much is too much?

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Re: Ask HN: How much is too much?

#31

Post by trizk »

aaronblohowiak wrote: post #27
timelinex wrote: post #16

Earlier quoted context omitted.

This doesn't say anything about whether to take this guy's money. They can still get money from banks, friends, other angel's or get this guy to reduce his terms. Right now, this guy wants to know what are his options.

I am suggesting that an "Avoid the worst" strategy may be superior to "pursue the best" strategy because the absolute value of "the worst" is far inferior to the margin between this (suboptimal) option that he has and an optimal option that we may only imagine.

The only problem with this strategy is that 30% may leave you with nothing as the majority owner drives the company into the ground or fires you prior to vesting. You would be in a worse situation than 0 because you would have invested your time and energy. As entrepreneurs, we all know how demanding a start-up is. To be swindled is just not an acceptable result of effort.

Edit: spelling

Re: Ask HN: How much is too much?

#32

Post by aaronblohowiak »

trizk wrote: post #31
aaronblohowiak wrote: post #27

Earlier quoted context omitted.

I am suggesting that an "Avoid the worst" strategy may be superior to "pursue the best" strategy because the absolute value of "the worst" is far inferior to the margin between this (suboptimal) option that he has and an optimal option that we may only imagine.

The only problem with this strategy is that 30% may leave you with nothing as the majority owner drives the company into the ground or fires you prior to vesting. You would be in a worse situation than 0 because you would have invested your time and energy. As entrepreneurs, we all know how demanding a start-up is. To be swindled is just not an acceptable result of effort. Edit: spelling

Right, i wouldnt give up control until i exited. i assumed two founders bringing in an investor who would take 1/3, so the two colluding founders would still have control.

Re: Ask HN: How much is too much?

#33

Post by gyardley »

Sounds like a bad deal to me (and the directorship would be a non-starter) - but I don't know what you're building. You need to figure out fast whether this investor's valuation is disappointing but accurate, or just artificially low. The only way to do that is to take it to the market.

First, send me an e-mail (see my profile). One of my own angel investors is Canadian and so is most of his portfolio. I'll happily make an introduction.

Second, AngelList (angel.co). A great way to get in front of a whole lot of angels at once. AngelList also has a decent number of Canadian participants - listed at angel.co/canada. If AngelList itself doesn't work for you, you can always get in touch with them individually.

Re: Ask HN: How much is too much?

#35

Post by Jabbles »

mbyrne wrote: post #5

The quick answer if that if you are going to sell 1/3 of your company for two months of ramen noodles then you don't really think much of it. Already I can tell this guy is not an angel, he smells blood. Plus he's running his company full-time but wants to be a one third partner? When? on weekends? You said you would give numbers but then don't. How much money do you need to survive two months? or is it not two month…

If the company is worth 750k and he's putting in 250k he should only get a quarter of it, since it will then be worth 1m.

Re: Ask HN: How much is too much?

#36

Post by mbyrne »

Jabbles wrote: post #35
mbyrne wrote: post #5

The quick answer if that if you are going to sell 1/3 of your company for two months of ramen noodles then you don't really think much of it. Already I can tell this guy is not an angel, he smells blood. Plus he's running his company full-time but wants to be a one third partner? When? on weekends? You said you would give numbers but then don't. How much money do you need to survive two months? or is it not two month…

If the company is worth 750k and he's putting in 250k he should only get a quarter of it, since it will then be worth 1m.

yes depends if the valuation is pre or post his money, Jabbles was not explicit.

Re: Ask HN: How much is too much?

#37

Post by trizk »

aaronblohowiak wrote: post #32
trizk wrote: post #31

Earlier quoted context omitted.

The only problem with this strategy is that 30% may leave you with nothing as the majority owner drives the company into the ground or fires you prior to vesting. You would be in a worse situation than 0 because you would have invested your time and energy. As entrepreneurs, we all know how demanding a start-up is. To be swindled is just not an acceptable result of effort. Edit: spelling

Right, i wouldnt give up control until i exited. i assumed two founders bringing in an investor who would take 1/3, so the two colluding founders would still have control.

I think the op mentioned that the investor wants a majority stake. Otherwise, I agree assuming that you know your co-founder well enough that s/he dose not collude with the investor to oust you.
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